WARNING:
This Digest was prepared for debate. It reflects the legislation as
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Bill.

The Multilateral Investment Guarantee Agency Bill provides for
appropriations and the issue of securities authorised by the
Treasurer in order to fulfil the requirements for Australia's
membership of MIGA.

MIGA was established by an international convention on 12 May
1988 as one of the World Bank group of financial institutions
designed to encourage the flow of investment to member countries
and, in particular, to developing member countries. It was created
on the premise that investors were inhibited by fears of
non-commercial risks and lack of local knowledge and technical
assistance from directly investing in projects in developing
countries. The functions of MIGA include to issue guarantees,
including coinsurance and reinsurance, against non-commercial risks
in respect of investments in a member country which flow from other
member countries.

MIGA offers protection against:

losses arising from an inability to convert local currency
investment returns into foreign exchange for transfer out of the
country, but does not protect against currency devaluation;

partial or total loss resulting from acts by the host
government which may reduce or eliminate ownership of, control
over, or rights to the insured investment, but does not insure
against bonafide non-discriminatory measures taken by the host
government in the exercise of legitimate regulatory measures;

losses arising from the investor's inability to obtain or
enforce a decision or award against a host country that has
repudiated or breached an investment contract;

losses from, damage to, or the destruction or disappearance of,
tangible assets caused by politically motivated acts of war or
civil disturbance in the host country, including revolution,
insurrection, terrorism and sabotage.

MIGA's investment marketing services focus on promoting
investment in developing and transitional economies, disseminating
information on investment opportunities and providing a range of
technical assistance and legal advice. These services complement
the programs and activities of other donor institutions, including
the World Bank and the International Finance Corporation (IFC), the
private sector lending arm of the World Bank. MIGA has also
participated with the United Nations Industrial Development
Organisation and with corporate sponsors in investment promotion,
technical assistance and funding support.

Since its inception, MIGA's board of directors has considered
215 projects. Forty developing countries have benefited and more
than $US15 billion of direct foreign investment has been generated
from investment guarantees issued by MIGA [International Economic
Division, Treasury, briefing paper].

There are 128 developing country members of MIGA, and 21
industrialised countries who are members or who have signed the
Convention including the United States, Japan, Germany France,
Italy, Canada, New Zealand and the United Kingdom.

The justification for Australia joining MIGA is that membership
not only encourages the objective of economic growth, part of the
rationale for our policy of overseas aid, but also facilitates
commercial opportunities for Australian businesses operating in
developing countries.

In its report to the previous government, Australia, the
World Bank and the InternationalMonetary Fund, the
Parliament's Joint Standing Committee on Foreign Affairs, Defence
and Trade recommended that Australia join MIGA because the benefits
of membership outweighed the costs.

The Treasurer, Mr Peter Costello, Australia's World Bank
governor, signed the MIGA convention on behalf of Australia in
Washington on 30 September 1996. Under the MIGA Convention
Australia has been allocated 1 713 shares at a total cost of $US18
534 660. Of this amount ten percent will be paid in cash to MIGA in
a once-only payment, with a further ten percent covered by a
promissory note. The remainder of the cost, $US14 827 728 will be
at call. The promissory note and the amount at call will be
contingent liabilities for Australia, but are subject to call by
MIGA only in the event that these amounts are needed to meet its
obligations.

Ian Ireland and Colette Ormonde
8 August 1997
Bills Digest Service
Information and Research Services

This Digest does not have any official legal status. Other
sources should be consulted to determine whether the Bill has been
enacted and, if so, whether the subsequent Act reflects further
amendments.

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Published by the Department of the Parliamentary Library,
1997.

This page was prepared by the Parliamentary Library,
Commonwealth of Australia
Last updated: 12 August 1997